On Wednesday, U.S. stocks experienced sharp declines as rising Treasury yields weighed on investor sentiment. The Dow Jones Industrial Average fell 409.94 points (0.96%) to 42,514.95, marking its worst day since early September. The S&P 500 dropped 0.92%, closing at 5,797.41, while the Nasdaq Composite tumbled 1.6% to 18,276.65. Both the Dow and S&P 500 saw their third consecutive day of losses.

Treasury yields continued their upward trend, with the 10-year yield reaching 4.25%, its highest level since July 26. The yield has risen by 44 basis points in October alone, reflecting concerns about the Federal Reserve’s monetary policy and potential future fiscal deficits. Analysts believe higher rates could lead to further repricing across different sectors of the economy. This, coupled with fears of recession, has created a fragile market environment.

Large-cap stocks, particularly in the technology sector, faced significant pressure. Apple, Nvidia, Meta, Netflix, and Amazon all suffered losses of over 2%, with Apple declining 3%. Investors remain cautious as the upcoming weeks bring key tech earnings reports, the U.S. election, and further Federal Reserve meetings.

In the bond market, the cost of hedging against Treasury losses reached a yearly high. Rising options prices signal concerns that losses in bonds may deepen. Meanwhile, there is still uncertainty over the number of rate cuts the Fed will make by the end of the year.